Troubled business software maker Siebel Systems Inc. said Wednesday that it will begin paying a quarterly dividend, hoping to placate disgruntled shareholders who want the company to either stop hoarding its cash or sell itself.

CEO George Shaheen, who took over at Siebel two months ago in an abrupt shake-up, announced the 2.5 cent-per-share quarterly dividend before the San Mateo-based company's annual meeting. He also reiterated an earlier vow to reverse years of eroding sales and promised to expand the company's board by adding two more directors -- another apparent move aimed at soothing ruffled shareholders.

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The dividend -- the first in Siebel's 12-year history -- will cost about $51 million annually, hardly putting a dent in the company's bank account. As of March 31, Siebel held $2.2 billion, money that a growing number of shareholders believe should be returned to them as a much larger dividend or a stock buyback program.

Siebel's new dividend "is a distraction. It's basically just the interest that they earn on their cash," said Herbert Denton, president of Provident Recovery, a company shareholder who has been organizing other unhappy investors.

Shaheen defended the size of the dividend, noting that the payment represented a 1.1 percent yield on Siebel's stock price before Wednesday's decline. The average yield of other dividend-paying technology companies in the Standard & Poor's 500 index is 0.8 percent, Shaheen said.

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If Shaheen's plan falters, Denton believes Siebel ultimately will be sold at a bargain price to an opportunistic buyer like Oracle Corp., which listed the company on an internal list of takeover candidates drawn up two years ago.

Shaheen declined to say whether Siebel had been contacted by Oracle or other suitors. He said he remains more interested in buying other companies to help Siebel expand its market share, but also stressed that the decision to sell ultimately is out of his hands because the board has a fiduciary responsibility to shareholders.

"If a bona fide offer comes along, we will have to consider it," Shaheen said.

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